A General blog by Paul Bennion.
Boosted by record low interest rates and the expectation of even more reductions, investors are collectively borrowing over $1 billion on average each week to purchase investment properties.The latest lending figures from the Australian Bureau of Statistics (ABS) show that that the value of home loans secured for investment properties reached $17.45 billion for the March quarter 2013.This is an increase of over $1.4 billion or 9.1% over the year, compared to the March 2012 quarter when ABS home loan figures were $15.99 billion.Additionally, the average size of home loans has also increased during the past year. In March 2012, the average size of a home loan was $289,600. By March 2013, this figure had grown to $301,100.According to Paul Bennion, Managing Director of DEPPRO, property investors have increased borrowings over the last year in response to current low interest rates and the expectation that rates will fall even further.“We are also seeing many investors choosing to purchase more expensive investment properties for future capital growth prospects,” Bennion said.“Traditionally, investors are very active in the sub $500,000 price range because these lower priced properties are more affordable and returns are high. However because interest rates are now so low and properties in the $500,000 to $800,000 range are still very competitive, DEPPRO is finding a growing number of investors now buying in this more expensive price range.”Bennion added that the tax depreciation benefits of more expensive properties could be quite significant, especially if the property is new or relatively new.“It’s important for investors to ensure they obtain a tax depreciation schedule to claim these legitimate tax saving, which can amount to 60% of the total purchase price of a property in some cases,” he said.